Why have college costs gone up so much?

One thing is the disproportionate growth of administrators. Another is the fact that faculty fight productivity increases and continue doing things the way they always have,.

Like any enterprise, when more funds are available to consumers, they raise the prices – i.e., our government increases funds for student loans and grants, Universities raise tuition.

State colleges like Penn State have had their funding cut repeatedly by their state legislatures. Penn State’s funding was once 100% covered by the state, and tuition was free. Now only 17% is covered by the state. Tuition and expenses at this public university are now $26,500, and private universities are even more expensive. I think though that in general college costs are a barometer of the value of money. An education has about the same value generation to generation, but the dollars get smaller. Many good colleges were about $5000/year 40 years ago and might be up to $50,000 now, but consider the fact that 40 years ago a Jaguar XKE also about that same $5000, and the 2010 Jaguar XK has a MSRP of $82,150. That makes the colleges seem like a bargain.
http://www.automobilemag.com/am/99/2010/jaguar/xk_series/xk_coupe/3042/prices.html

crisis.

Same reason getting your driver’s license renewed has gone from $6.00 when I renewed it six years ago, to $28 this year. People are taking whatever they can get.

The same reason a bag of chips, a house, a car or anything goes up so much….
Inflation.

As long as we keep printing money, the dollar will continue to lose value and prices will keep rising.

The same reason a bag of chips, a house, a car or anything goes up so much

Home prices tanked and car prices have been steady in recent years. I don’t know about the price of chips.

Home prices have tanked because they were artificially inflated due to an excess flow of credit into the market(which is allowed because we are able to just print money), which drove up prices of homes, which helped cause the economy to collapse, which is causing the prices to go down now.

What do you mean by recent years while referring to car prices? Do you mean since the collapse?

I remember a bag of chips costing a quarter when I was younger. I dont remember the last time I saw a .25 bad of chips. Instead, it’s a bigger bag, bigger price, and probably less chips than were in the bag that cost a quarter.

Because public schools have lost large chunks of their government funding. (Private schools have always been expensive).

Other things play into it, but thats your biggest reason. As a poster said before, many public schools (Penn State I believe was the example) used to be entirely or nearly entirely government funded. But there has been a sad shift away from effective education policy over the past 30–50 years or so. It simply hasn’t been seen as important enough to warrant attention, and the attention it has warranted has often times been met with crappy legislation that is ineffective and hugely unpopular (I’m looking at you “no child left behind” and “charter-schools”).

The cost of public univeristies is going up because they have to make up the difference somewhere, or cut the vast research they do and other things like that. And heaven help our country if they stop researching (its where a majority of our new technology and smart minds comes from, its EASILY the reason we’re the only super power in the world right now).

I read this article which I found pretty interesting. It mentions two major sources of cost increases in addition to the ones mentioned above by others. First, higher ed has to constantly purchase the newest and best equipment in order to compete with others. They also need to build new facilities to house this equipment (counter to your supposition about not needing to). If you look at Penn and Drexel and Temple (in my town) you’ll see new buildings going up at each one. So higher ed capital costs are increasing.

Second, the cost of labor is always going up because higher ed is competing with private industry to hire the best people. Private industry, like banking and tech have been driving up their wages. They can do this because they are also seeing huge productivity increases.

In higher ed, your costs are labor, and you can’t really get more out of professors than you already get. But you have to compete with private industry to get your professors.

In addition, states are cutting back on the amount they contribute. Also endowments have not been doing well, and higher ed has to be careful in spending that money.

Finally, some good news. The sticker price (the scary one) is not the actual price. For most kids, financial aid and loans lower the price.

You ask about profits. Since higher ed institutions are almost universally non-profit, they don’t make profits. They take the money they make and plow it right back into the institution to try to make it more competitive.

So, increased capital costs, increased labor costs, and reduced state subsidies mean that higher ed has to charge more in order to stay in the black. But they don’t make profits and the sticker price is not the actual price, so things are not as gloomy as they might seem.

”...you can’t really get more out of professors than you already get.” That’s not correct. The amount of teaching done by professors has gone down over time whereas their salaries have gone up. So we’re getting less and less for more and more expense. That’s a decline in productivity combined with an increase in cost.

@ItsAHabit Teaching is not all they do. They also do research. If their teaching loads were increased (which would be difficult due to contracts and collective bargaining), they’d be off to industry. Increasing teaching load would be seen as a reduction in salary by most professors. Also, higher ed maintains its prestige based on how many publications in top tier journals their professors have. I don’t think you can improve their productivity.

@ItsAHabit wundayatta is correct. If all they were supposed to do was teach, we’d never have had the inventions of famous professors like Albert Einstein, Isaac Newton, Stephen Hawkings, that guy from A Beautiful Mind (lol), etc, etc, etc.

Thanks so much for all of the answer so far. I learned a lot. @tedd brought up a point that I dwell on a lot on fluther, that with limited government money I prefer it be spent on high school and college than very young children in no child left behind. Not sure what I think about charter shcools, I don’t know enough, but I have seen wonderful magnet programs, and I would hate to move away from that, especially at the high school level.

I don’t really buy the inflation reason, because in the last 20 years, there has not been much inflation, and housing priced were ridiculous and not in line with inflation, so I do not think that is a fair example of goods costing more. Plus, according to @wundayatta article it states that college education has outpaced inflation. I did not realize that professors were in such a limited supply, which I guess contributes to such a competitie market for salaries, and why tey have gone up.

Loans do not make school cheaper or more afffordable in my opinion, but I guess people who think in terms of what can I afford a month, which is a lot of America, they may perceive it that way.

Also, thank you @wundayatta for pointing out new buildings are being constructed, because that is trully something I was not taking into account as a large capitol expense. My university (I graduated 20 years ago) did just build a new art museum, and is renovating all of their cafeterias, I have no idea if the art museum is from donations, or actually taking from tuition fees. I would assume the cafeterias use money from dorm and meal plans, but I really have no idea how funds are appropriated.

I also did not know that public universities are actually non-profit, I never really thought about it, or put the idea together in my mind that public would most likely mean it is non-profit. The one thing about government and non-profit, is at times, if they are “making money” they have a choice, they can lower tuition or give some money back to students, or find something to spend the “extra” money on to not show a profit. I would guess it depends on the institutions, and which mindset they have, and what controls are set in place.

I don’t think we can blame government grants and scholarships, because if that student was not given a grant, a paying student would probably take his place. I think of grants and scholarships as helping a student who might have otherwise not been able to attend college. Other government grants and scholarships are given because there is a need for expertise in our coutry are usually paid back 10 fold. My father went on a government scholarship to Penn for grad school, because they were having a hard time getting people to go into the field of sociology. My dad has paid back the money spent on his education many many times in taxes over the years. Being a poor kid from the Bronx, he might never have received the education he did if it had not been free. His education is what helped him to be a properous and functioning part of society, and only makes our country richer in more ways than one.

The availability of grants and loans actually increases the demand for admission and also helps drive up the cost (it’s a seller’s market). P.S. I’m NOT arguing against the availability of such finding, only that it increases demand and costs.

@ItsAHabit I see what you are saying. I’ll think about it some more.

@Jleslie

There has not been much inflation in the past 20 years?
I hope you’re not using government stats to justify that.
Im only 27, so I barely remember what things cost 20 years ago, but i know that the cost of everything has gone up a lot since then.

How much has college gone up?
How much inflation have we had?

@chris6137 Well, I am 42 years old, and I can say that salaries have not gone up that much in my opinion for the average worker. Groceries have increased some, but it is not tremendous, and have some down recently. Gas cost more when I was in school, than 10 years ago when it seemed to dip back down, and then it went crazy high a few years ago as we all now, and came back down some. I was really going on my own perception, and not real stats, but here is an interesting and very clear bit of info/stats comparing goods and services http://www.usatoday.com/money/economy/inflation/2006-10-31-inflation-usat_x.htm

I had been thinking if salaries were a significant part of the expenses at a university (I have no idea what percentage of a school’s expenses is salary) that salaries have not gone up that much, but it seems that maybe salaries in education have gone up from what any have said above.

Still learning and reading on the topic myself.

@Jleslie
Thanks for the link.
My only problem is the use of CPI to determine what the inflation rate it.
Normally, CPI no longer includes food and gas, in your article it does. However, CPI does not include housing prices, but uses rent instead.
Here is an article that I have read about how inflation is alive and well.

The government is very good at fudging numbers to persuade public opinion.
Think about it this way…. Inflation is an increase in the money supply. Money is debt. Our national debt has more than doubled in the past ten years. Doesnt that mean our money supply more than doubled too?

I am not trying to argue against any other points made for your question. They are all excellent points.
Im just trying to get people to ask themselves the very simple and important question, “where does money come from and who controls what it is worth?”
We all know about supply and demand when it comes to goods and services, but what about supply and demand of dollars?

Public Universities are non-profit, so they rely heavily on the government as a source of income. Government has cut universities by as much as 50% or more over the past several years “due to the economy.”

@chris6137 I didn’t feel like you were being argumentative, I welcome the questions and the clarification. As I said I was going more by what I spent 20 years ago, and what I spend now, totally subjective, and not really valid in any way for generalizations I guess. I have wondered what controls the price of steel and lumber actually, but this would be a different question. I am suspicious that when housing prices started to go up irrationally steele and lumber just jumped the bandwagon, because they could.

@JLeslie

I came across this article this morning and thought of your question.

@chris6137 Thanks :)

From the article…
“Well, advice number one – good for pretty much all bubbles, in fact – is this: Don’t go into debt. In bubbles, people borrow heavily because they expect the value of what they’re borrowing against to increase.”

This will never end until we examine and fix our debt-based monetary policy. As long as it stays as it is, saving for college for a child from age 1–18, will mean nothing by the time the child is 18, if majority are just borrowing money which will artificially inflate the price of tuition based on the amount of credit available.
This whole system is based on bubbles and bursts, which are determined by a select few.
It is a ponzi scheme and if/or when people stop borrowing, the economy “collapses.”
There can never be a true market without true money.
Money as Debt

@chris6137 Well, I disagree a little. Education is different than a house is different than a car, etc. I agree don’t go into debt for an education when a less expensive school will probably be adequate. But, if you buy something, and have bought it knowing the price, then the person is resposible for paying it, even if the value goes down. No one takes a student loan thinking it will hold its value like an investment. It is a price a person has agreed to pay for that particular service. If people stop paying it, or attending schools that are more reasonable priced, prices will come down.

From a report by Greene, Kisida & Mills (University of Arkansas) on “Administrative Bloat in Universities” In 2007 39% full time university employees in administration compared to 29% in 1993.
Why?: Because they can! As long as parents and students are willing to pay ever increasing tuition and taxpayers increase subsidies for higher education, university administrators will direct resources as the want.

From the New York Times:

As their state financing dwindled, four-year public universities increased their published tuition and fees almost 8 percent this year, to an average of $7,605, according to the College Board’s annual reports. When room and board are included, the average in-state student at a public university now pays $16,140 a year.
At private nonprofit colleges and universities, tuition rose 4.5 percent to an average of $27,293, or $36,993 with room and board.
The good news in the 2010 “Trends in College Pricing” and “Trends in Student Aid” reports is that fast-rising tuition costs have been accompanied by a huge increase in financial aid, which helped keep down the actual amount students and families pay.
“In 2009–2010, students got $28 billion in Pell grants, and that’s $10 billion more than the year before,” said Sandy Baum, the economist who is the lead author of the reports. “When you look at how much students are actually paying, on average, it is lower, after adjusting for inflation, than five years earlier.”

So the “good news” is that “students and families” don’t have to pay all that extra tuition. That nice Mr. Pell will do it!

Actually, that’s not quite how it works. Mr. Pell—you can call him Claiborne—is no longer with us, having died last year. A senator from Rhode Island from 1961 through 1997, he doesn’t actually pay for Pell grants. All he had to do to get his name on them is sponsor the legislation establishing them.

Who pays then? Why, students and families, along with other taxpayers. And since the country is deep in debt, their grandchildren will pay too. Let’s hope they can afford it!